Earlier this month Spanish banking giant Santander became the latest global bank to announce the launch of a fintech fund, as the sector struggles to keep up with the new technologies radically reshaping it.

The $100 million corporate venture fund will invest in early stage fintech companies with the aim of supporting the development of relevant technology.

Financial News spoke to Victor Matarranz, director of strategy and chief of staff to the CEO at Santander UK, about the fund and its plans.

What is the strategic reasoning behind launching a fintech venture fund?

The strategic rationale for the fund is quite clear. We are seeing a lot of movement in the digital space and nobody in this phase knows what the right formula to innovate is going to be, but we are trying a number of things.

The key objective of the fund is actually not to get a financial return. We would be very happy to have one obviously, but the key objective is to enhance the value proposition of the bank. We want to partner and invest in new ventures that produce services and innovation that later we can plug into.

Considering that venture capital is the route for these companies to get funding, we thought it was a good idea to launch this fund on top of our organic internal initiatives.

Is it no longer sufficient to just have internal innovation initiatives?

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I think we have to try different things. It’s not only banks: When you look at most industries, big corporations are not the fastest animals on Earth trying to innovate. When you look at financial innovations and you look at the past years, only a small percentage of the key breakthroughs came from banks. Many of them came from startups and new ventures, and even people who were not in the banking sector.

Banks are very good in assessing risk, in building relationships with our customers to serve their banking needs and so forth. But looking into other industries, looking into innovative models and so on, traditionally the small players have been better.

What are the areas where it makes more sense to get help from outside?

To me the most important area — the one where you are getting more innovation from outside banks — is payments. So in the payments space you have the Paypals, you even have companies like Google who are doing things and there are many, many startups coming up with interesting propositions in payments. That is probably one of the most important. Another very interesting area is big data and cloud.

What do banks have to offer as an investor that a VC doesn’t have? Some say that if you are a great startup you can get money from everyone, so why tie yourself up to a bank brand?

That is very clear to me. I totally agree with that: the money for funding in this market is a total commodity. If you have a good startup and a good business plan you will get people knocking on your door bringing money to you. What we really bring — and this is the distinctive proposition of a bank — is that the moment you partner with us we give you a customer base of 100 million individual customers and about 3 million corporate customers around the world. That to me is the unique proposition of Santander in this field: the ability to give you scale as a company and a very big customer base to reach out to from the beginning. That’s what a venture capital fund cannot give you.

Do you think some entrepreneurs might be wary of getting too closely associated with one bank?

Yes, but I think we need to look at it case by case. We are already having a lot of discussions; since we announced this I already have 50 business plans piling up here in my office. But in order to create value for each of them we need to find out what is the right model.

For example?

Imagine that you are a company creating a system that allows me to identify customers by looking at their face with a web cam. At Santander we would offer them the ability to deploy it in the bank’s customer base. Santander would still be happy for them to work in telecoms, in retail and other industries, but obviously in banking we would like a sort of exclusivity. In that case I think there is value for them in working for us because they can scale very rapidly.

What about applications which are exclusive to banking?

In some other cases, where applications are basically exclusive to banking, we would need to find a formula. In some cases Santander would, for example, have exclusivity for some time and then they could go to other banks, or they would have to work with Santander in our core geographies but maybe not in some others. We need to look for the right formula. This has to be a partnership between us and the startups and we have to find a formula that creates value for both without undermining their potential for growth in the future.

How does the fund relate to the rest of the organisation? Is it going to be independent but have sufficient support from high up in the organisation?

That’s a difficult balance. We are very aware of it and we are working to get the right balance there, because it is what has killed many of these attempts, not only by banks but by many other industries. It will be a kind of independent proposition but first we need to make sure that it is still compliant with all the regulations, second it will have a different governance process so it has the speed and agility it needs to have and third it will be in touch with the potential customers from the beginning.

Have you chosen someone to lead it?

We already have some members of the team, but we are still looking for the person who will be the managing director of the fund.

Do you have an idea of how many companies you would like to invest in?

We don’t have a parameter for that, but we believe we will go for Round A investments and the average of that investment is between $3 million and $5 million. Typical investments in companies in the payments sector are smaller, but for companies lending to individuals and SMEs they are normally bigger. We don’t have a restriction, we believe that these things make sense when we get there early enough so we can shape the proposition and we can really make a difference to them and give them our customer base.